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22 June, 13:08

Roscoe's credit card has an APR of 13.59% and it just changed its compounding period from daily to monthly. What will happen to the effective interest rate charged to Roscoe?

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  1. 22 June, 13:31
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    Here is the answer. If Roscoe's credit card has an APR of 13.59% and it just changed its compounding period from daily to monthly, this is what will happen.

    The effective interest rate is calculated with the formula: r = (1+i/n) ^n - 1 so initial effective rate, when compounded monthly is r = (1+0.1359/12) ^12 - 1 r = 0.1447 = 14
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